Tuesday 9 August 2011

Reindustrialisation in Scotland: One Big Union? - The International Context

In 2007, the European Union imported from Russia 185 million tonnes of crude oil, which accounted for 32.6% of total oil import, and 100.7 million tonnes of oil equivalent of natural gas, which accounted 38.7% of total gas import.

After becoming Chancellor of Germany, Angela Merkel expressed concern for overreliance on Russian energy.

The largest importers of Russian gas in the European Union are Germany and Italy, accounting together for almost half of the EU gas imports from Russia. Other larger Russian gas importers (over 5 billion cubic meter per year) in the European Union are France, Hungary, Czech Republic, Poland, Austria and Slovakia.

According to the IEA the gross production of electricity was 631 TWh in 2008 which gave the 7 th position among the world top producers in 2010. The top seven countries produced 59 % of electricity in 2008. The top producers were: 1) United States 21.5 % 2) China 17.1% 3) Japan 5.3 % 4) Russia 5.1 % 5) India4.1 % 6) Canada 3.2 % and 7) Germany 3.1 %

Now there is an over-riding imperative to reduce fossil fuel consumption. That has been backed by an EU goal of 20% renewables by 2020.

The largest economy in the EU is Germany. It is the second largest exporting country in the world. It is the industrial heart of Europe, as well as the largest importer of Russian gas.

It is worth considering their energy mix, in light of this statement, and in light of Angela Merkel’s aspiration to reduce reliance on Russian energy.

The electricity sector in Germany included in the year 2009 fossil fuelled power 61 %, nuclear power 23 % and renewable energy 18 %. Germany has defined a phase-out policy of nuclear power by 2022. In 2009 compared to 2004 the nuclear power was produced 19 % less and its share has declined from 27 % units to 23 % units substituted with the renewable electricity: wind power, biomass and solar power.

The installed nuclear power capacity in Germany was 20 GW in 2008 and 21 GW in 2004. The production of nuclear power was 148 TWh in 2008 (6th top by 5.4 % of world total) and 167 TWh in 2004 (4 th top by 6.1 % of world total).

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In 2009 compared to 2004 the nuclear power was produced 19 % less and its share had declined smoothly with time from 27 % units to 23 % units. The share of renewable electricity increased substituting the nuclear power.

Since Fukushima Angela Merkel has ordered the closure of eight nuclear plants which were undergoing a safety review and ensured which two more had been powered down will never re-open. This has been followed by a recapitulation of a scrapped earlier government commitment to phase out nuclear power.

If Germany is sincere about avoiding reliance on Russian gad, then these moves can only add to the pressure. The issue has been a flash point for a number of years now, and Europe’s reliance on Russian gas ensures that the energy wholesale price across Europe is very heavily reliant on whatever the quasi-national gazprom sets as the price Europe pays. The countries in Eastern Europe which have sought to assert themselves on the issue, by taking matters into their own hands and (allegedly) siphoning gas off or by refusing to pay the price in Eastern Europe, have found how tightly Russia will defend its position. Angela Merkel’s remarks were informed by this.

Russia, recognising that Europe’s need for gas has actually beengrowing, is building a new gas pipeline, which will replace (or at least add to the existing pipleine network, and skirt around those countries which Russia and Gazprom believe have been siphoning off gas. The new network is to be called South Stream.

Russia’s intention is to ensure that gas supplies remain the monopoly of Russia until 2050.

The European commission however has other ideas. It too has a pipeline plan, the Nabucco pipeline, will take gas from Turkmenistan, and pipe it through to Turkey, avoiding Russia.

BP backs a third scheme to pump gas from Iraq, but the capacity of this scheme would not alone meet European demand.

The competition between SouthStream and Nabucco has been intense, and sever diplomatic pressure has been brought to bear on the issue. At one point it did appear that Russia had gained the upper hand and defeated the EU’s preferred pipeline. The pipeline’s escalating costs and future construction date may yet mean it is never constructed.

A similar Western backed project (the Baku-Ceyhan-Tblisi oil pipeline was dealt a fatal blow recently, when the Georgian invasion of Russia, and Russia’s subsequent annexation of its former Black Sea ports made it too risky an investment for the capital to be raised.

Where then does Scotland fit into this?

Well Scotland is a country with an installed generating capacity of 17GW, which currently exports. Energy. However it is widely estimated the Scotland could produce a further 60GW [this is a massive underestimate, on current research] more from renewable energy. And in the meantime much of the infrastructure of plant materials is coming towards the end of its lifespan. Scotland’s two large nuclear power stations are due to close in just over ten years time.

The British government is known to favour replacing this infrastructure with three new nuclear power stations, and to continue modest expansion in the renewables market.

The Scottish government has declared that by 2020 a national target has been set to produce 100% of domestic energy needs, and to see no new nuclear plants, with 80% of current need being supplied by non renewable sources. This would make Scotland a net exporter of nearly 8 gigawatts of electricity.

Between these two energy policies, that of the British government, and that of the Scottish, there is no room for compromise.

The reason being is a consideration called baseload. This is the solid dependable electricity generation which provides year round supply of electricity during peak times, and troughs in demand.

Nuclear and fossil fuels form the baseload for electricity in Scotland today. Were nuclear to play an increasing role in the baseload of Scotland’s electricity mix (as the UK government plans) then that would significantly cqueeze the role of renewables.

This is because nuclear power plants are good at producing a steady supply of energy. But they are very bad at varying the amount of electricity that they supply. Changing the electricity supply rate in nuclear power plants are at their most dangerous.

Wind energy on the other hand (all varieties) is typified by falling and rising rates of collection, and hence wind turbines produce a variable rate of electricity supply.

An electricity grid which was weighted towards both nuclear power and wind power would be one which was weighted towards disaster.

We can see then why an ever increasing concentration in offshore and onshore wind is not compatible with a plan to be building three new nuclear power plants, when a number of coal fired power stations are also coming up for renewal.

This backdrop forms the real economic argument between the SNP and Labour today. Labour have shown far more enthusiasm for community micro generation than they have to get behind the national drive to reindustrialise the country with renewables. Their belief in nuclear power ensures that the cannot coherently endorse this plan with their current energy view.

There is also the issue of what to do with the electricity when this surplus is generated. At present the current mechanisms for the sale of electricity involve often complex transmission charges, and in some parts of the country energy supply networks operate at capacity, and so cannot allow for more energy to be transmitted. This is a major barrier to bringing electricity to market, as a product. Furthermore, the only available client with the current grid, is England’s electricity grid.

Unionists are keen to point out that at the moment utility firms do not own production plant (by and large), and they ‘buy’ electricity we use, first on wholesale markets. Because of its plentiful and invariable supply, and because France has not liberalised its energy market, French nuclear energy is a favourite of UK power companies, whereas Scottish renewable energy is seen as not competitively priced.

So the pro-nuclear unionist argument goes, then, the Scottish Government’s plan is develop expensive power which it will then sell to England. This is asking a lot of England’s political patronage from an SNP government is it not?

Well this is where the argument starts to unravel, and where the context to energy politics in Europe becomes especially salient, and it amounts to one of the centrlal planks of the medium to long term strategic disagreements between the Scottish Government and the British government and Unionist parties over the question of Scotland’s economic future.

Last year, Alex Salmond gave an hour long speech on the question of Scotland’s future. He mentioned something called the European Supergrid only once, and then he qualified it by saying it would cost 100 euros to construct, but his enthusiasm for this idea was palpable.

The European super grid is an idea that has been considered alongside an idea called a European smart grid (a grid that uses software to target energy need and energy supply much more effectively). The latter has gained official assent as a European wide energy policy. The former is often seen as being ‘the other option’ but in effect does not necessarily behave as in conflict with the smart grid. A super grid for Europe is the idea that the North Sea and the Maghreb become linked through continental electricity transmission cables to the central European energy grid. This would be primarily to supply the German market with electricity from solar power in France, and wind power from Scotland and Norway.

When you consider that Scotland‘s .untapped energy potential from renewables alone, adds up to over half of Germany’s energy needs, then the significance of the Scottish Government’s reindustrialisation plans becomes clear. A future German premiere could look forward to stopping all imports of Russian gas, to rely instead on German renewables. Significantly also, a major part of Angela Merkel’s volte face on nuclear plant shut downs was due to a rise in support for the German greens as a political force. That kind of ongoing politics makes an SNP Scottish Government with such renewables aspirations a more attractive prospect.

In the backroom wheeler dealing of international diplomacy could such an economic vision allied to being so disposed to a European super grid loom large with Germany, during any independence negotiations? Time will tell but the European context is particularly salient to the debate about Scotland’s energy future, and the struggles between world powers as a consequence of energy security and dwindling fossil fuel supplies considerations loom large as a background to this discussion .

Put simply then Scotland is not just choosing between different variations of sovereignty - we are to choose between being the bulwark of European energy and the centre for production of plant materials for a very rapidly growing global industry, or it is to be saddled with a nuclear future which actually prevents growth in a sector where Scotland is uniquely blessed to specialise in.

The economic consequences of that decision are of such a magnitude for Scotland that they are akin to our economy to electrification, the discovery of the internet, the post war plans, or the mass privatisations were in scale, but in terms of the gravity of the situation, choosing the wrong way will tie Scotland in to the cycle of decline which Westminster has been managing, still further, whereas Scotland has the chance to forge a whole new manufacturing industry, located in urban Scotland, while the country profits form a permanent and renewable energy led boom whose profits lay the basis of a sovereign wealth fund to rival Norway’s.

This economic choice is in effect the real choice Scots will face in an independence referendum.